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Private Briefingwith WILLIAM PATALON III, Executive Editor
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20-year seasoned market analyst and professional trader with highly accurate track record. Specialty in Asian markets.
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Income investors looking for stocks to buy in the energy space have had several prominent choices over the years.
Integrated names such as Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), for example, have lengthy dividend increase streaks, though neither fit into the high-yield category.
Royalty trusts and master limited partnerships (MLPs), two asset classes abundant in the energy sector, have surged in popularity in recent years mostly due to their large payouts and high yields. MLPs have also proven popular with conservative investors due to the predictable, prosaic nature of the oil and gas transportation business that leads to a steady stream of rising dividends.
But broadly speaking, the oil services subsector has been left out of the energy dividend conversation.
Oil services investors have had only a couple options within the sector when looking for dividend stocks to buy.
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Schlumberger Ltd. (NYSE: SLB), the largest oilfield services provider in the world, has more than doubled its payout since 2006, but that still equates to a paltry current yield of 1.6%. SeaDrill Ltd. (NYSE: SDRL) is the sector's dividend star with a yield of 9.1% -- but questions persist over how valuable that name is at current levels, particularly following a disappointing fourth-quarter earnings report. The stock also comes with a beta of more than two.
However, the high-yield options in the sector are starting to change. And it could be both familiar and obscure names that make the oil services group the next great frontier of dividend growth in the energy patch.
Consider these alternatives for noteworthy dividend growth in the oil services sector in the coming years.
For a while there, it sure seemed like this drilling services company could not get out of its own way.
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